Ranking Financial Reporting Transparency Methods: An Application of Analytical Hierarchy Process

Abstract

Objective: In this research, different methods of measurement of reporting transparency are identified by reviewing the literature. The methods are ranked by applying the Analytical Hierarchy Process, (AHP). Method: The methods of measuring reporting transparency in this study are the Transparency Index in the Tehran Stock Exchange, TSE, the Bushman et al (2004) framework, and the S&P criterion. A sample of 20 financial managers and experts was selected, and a questionnaire was distributed among them. Then, the experts' views were analyzed by Expert Choice software. Result: Findings indicate that among qualitative properties related to the measurement of reporting transparency, reliability is in the highest rank and timeliness and relevance in the next, respectively. Also, the final analysis showed that the Transparency Index in the TSE is ranked first, the Bushman et al (2004) framework is second, the S&P criterion is third and earning quality is fourth. Conclusion: According to the results, it can be argued that based on the experts' view, the best method of measuring report transparency are the Transparency Index in the TSE the Bushman et al method (2004), and the S & P benchmark. It is due to the simplicity and easy availability of that benchmark, while other methods require more indicators and analyses.

Keywords

• financial reporting transparency
• ahp method
• tehran exchange transparency index
• bushman et al (2004) framework
• s&p criterion